The heads of two powerful House committees late Tuesday reached a deal that paves the way for a vote on climate change legislation by the end of the week.

House Agriculture Committee Chairman Collin Peterson (D-MN) and House Energy and Commerce Committee Chairman Henry Waxman (D-CA), chief sponsor of the climate change bill, brokered an agreement resolving the concerns of rural Democrats after weeks of negotiations.

“We have reached an agreement that works for agriculture and contributes to the reduction of greenhouse gas emissions in the United States. The climate change bill will include a strong agriculture offset program run by the U.S. Department of Agriculture (USDA) that will allow farmers, ranchers and forestland owners to participate fully in a market-based carbon offset program,” said Peterson. The deal also addresses provisions in the climate change bill that “unfairly restricted” U.S. biofuels producers, he noted.

“We think that we have something here now that could work for agriculture,” Peterson said during a teleconference Wednesday. “I think they [Democratic leadership] will be able to get the votes to pass this” later in the week.

“Basically we’re going to have an offset program for agriculture that we believe will work…and the decision was made to leave the running of the program and rulemaking and so forth with the USDA without EPA [Environmental Protection Agency] involvement. There probably is a role for EPA in this. The bottom line problem is that EPA doesn’t trust agriculture and agriculture doesn’t trust EPA,” Peterson said. The House has sent a letter to the White House to get its input on what EPA’s role should be.

In addition, Peterson said he got rural electric co-ops an additional half percent of emission credit allowances. Under the climate change bill, emission credit allowances are based 50% on a utility’s historical carbon emissions and 50% on retail sales. Rural utilities complained that the formula favored utilities on the East and West Coasts at the expense of Midwest utilities.

A utility with a lot of hydro would get more emission credit allowances than it needs to offset its cost under the original House bill, Peterson said. “People saw that as an unfair situation. So they [certain utilities] will be limited — even though the formula is 50-50 — if this generates more allowances to them than they actually have the need for. Those allowances will go back into the pool and those will be distributed based on emissions…which will help people like the rural electrics, municipals [and] some of the small investor-owned [utilities],” he noted.

Peterson, a Blue Dog Democrat, represented a group of 40-45 Democrats from farm states who said they would vote against the climate change legislation (HR 2454) that was passed out of the House Energy and Commerce Committee in late May if changes favorable to rural states were not made (see Daily GPI, May 26). The opposition of rural Democrats, along with House Republicans, would have been enough to doom the bill sponsored by Waxman and Rep. Edward Markey (D-MA).

“This compromise puts Democratic leaders within striking distance of the 218 votes needed to pass the bill” before leaving for the July 4th recess, said FBR Research. Debate and vote on the bill is slated for Friday, but the Democratic leadership has indicated that the House will be held over until Saturday if needed to complete voting (see Daily GPI, June 24).

Peterson has said he will vote for the bill, but other rural Democrats are waiting to see the final language, which is expected to be released Wednesday, CQ Today reported. The language is expected to be opposed by environmentalists.

The Independent Petroleum Association of America urged House Democrats to restructure the climate change bill so that it encourages, rather than discourages, the production of domestic natural gas and oil. It is especially opposed to a provision that would restrict producers’ access to over-the-counter markets.

In a letter to Congress Monday, American Petroleum Institute (API) President Jack Gerard called on the House to reject the climate change measure. “It would mean gasoline at more than $4 a gallon. It also will create huge disincentives for the production of America’s abundant natural gas resources, and force jobs and productive capacity overseas,” he said.

“API supports legislation to reduce emissions of greenhouse gases in lieu of ill-suited federal and state regulatory programs. The oil and natural gas industry is responsible for 44% of the $133 billion in total public- and private-sector investments in low-carbon energy technology since 2000. Unfortunately the approach taken by the Waxman-Markey bill is so fundamentally flawed that the House should reject it.”

Legislative observers believe the climate change bill will clear the House this year, but not Congress. “While the House may pass a climate measure this summer, we continue to believe the hurdles in the Senate are likely too high for final passage in 2009. Challenges in the Senate may be exacerbated if the House only narrowly passes its climate measure,” said energy analyst K. Whitney Stanco of Washington Research Group.

The climate change bill, which the Congressional Budget Office estimated would cost the average household $175 in 2020, seeks to cut heat-trapping greenhouse gas emissions by 17% from 2005 levels in 2020; by 42% in 2030; and by 83% in 2050. The Environmental Protection Agency projects that the measure would cost the average household $80 to $111 a year.

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